CG17318 | Indexation: from 6/4/88 example: indexation allowance
From HM Revenue & Customs · Capital Gains Manual
This example illustrates the freezing of indexation allowance for disposals made on or after 6 April 1998, except for disposals made by companies within the charge to Corporation Tax.
In June 1987 Miss D buys an investment property for £80,000. In July 1998 she has an extension built onto the property at a cost of £20,000. Then in September 1999 she sells the property for £180,000 less costs of £2,000.
| - | - | Amount |
|---|---|---|
| - | Disposal Proceeds | 180,000 |
| LESS | Costs of disposal | 2,000 |
| - | - | 178,000 |
| LESS | Cost of acquisition | 80,000 |
| - | Enhancement expenditure | 20,000 |
| Unindexed gain | - | 78,000 |
| LESS indexation allowance to April 1998 | 80,000 at 0.596 | 47,680 |
| Indexed gain | - | 30,320 |
There is no indexation allowance on the enhancement expenditure because it was incurred after 31 March 1998.
Because the disposal was made before 6 April 2008, taper relief, see CG17895+, may be due in calculating the CGT due on the gain, see CG17895+ (available from National Archives).